Hard Birth and Fast Start For Our Now-Almighty Dollar

It’s easy to forget that many aspects of the American past were as messy as the present of “failed states” that we’re engaged with now. I was in Afghanistan when I read Greenback , Jason Goodwin’s history of the American dollar. There, where three different sorts of local money-besides dollars and Pakistani rupees-are in circulation, the confusions of the early history of American currency don’t seem so distant, or so improbable.

We have mainly forgotten the many inconveniences of monetary transactions in the early days of the Republic. Mr. Goodwin makes them vivid: the myriad local banks, whose currency was good only in the vicinity; the chronic lack of small change that increased the cost of daily needs; the widespread use of Spanish, French and British money up through the Civil War. Most of us, with our dim ancestral recollections of a past of silver dollars, probably never knew that Massachusetts issued paper money before any European state, in 1691.

Mr. Goodwin, whose earlier books include a well-received study of the Ottoman Empire, Lords of the Horizons , gets at the essential point early: Americans accepted paper money readily because its artificiality made sense to those whose newborn society was also an artificial transplant. Still, until the 20th century, paper money had influential opponents who fought a passionate, losing battle for a currency issued in, or at least exchangeable for, gold or silver.

To entice us into this essentially abstract subject matter, Mr. Goodwin focuses on the men who tugged our currency this way and that. His brief biographies of Benjamin Franklin and Thomas Jefferson are especially apt, the sketch of Alexander Hamilton more perfunctory. Mr. Goodwin brings to light the forgotten achievements of Jacob Perkins, whose success at foiling counterfeiters in 1804 made the dollar secure; Nicholas Biddle, president of the Second Bank of the United States; his populist enemy, Andrew Jackson; Lafayette Baker, founder of what became the Secret Service; and many more, up through William Jennings Bryan.

Franklin was an early advocate of paper money, and Mr. Goodwin makes a vivid case for his importance, dimmed for a century by his calculating morality. Franklin argued that the expansion of the money supply by paper would lead to an increase in the price of land and encourage people to spend their money rather than hoard it for the interest it would bear. Lower interest rates, in turn, would encourage the opening of new businesses.

The American Revolution can be partly laid to the cause of paper money. At the very beginning of the Declaration of Independence are two little-noticed complaints blaming Parliament for ignoring laws enacted by colonial governments. The laws in question authorized printing money. The colonists had long printed paper money to pay for the cost of the French and Indian wars, and the British had tolerated the practice. But by 1764, when the British finally banned paper money, Canada had been secured and the Indian threat subdued. That this currency increased the prosperity of the colonies interested the home country not at all; the point of the colonies was to provide cheap natural resources, period.

Since the colonies had no money with which to wage war, they simply printed it: the now-infamous Continentals. As Mr. Goodwin points out, these were the earliest symbols of the United States. Creating its own money was the first act of the infant confederation-which goes some way toward explaining the American preoccupation with money that Europeans always remark. Mr. Goodwin comments that in times of economic or political stress, Americans tended to blame money itself, arguing for paper or for silver dollars, as the crisis of the moment suggested.

After Franklin, Mr. Goodwin turns to Jefferson, an early opponent of a paper currency. Though he argued against paper money on the grounds of its potential to corrupt, Jefferson was himself perpetually in debt. He tried freeing some of his slaves in his will, but his heirs sold them to pay creditors. It was nonetheless Jefferson who decimalized our money (except for the quarter, a legacy of the practice of physically splitting larger coins for scarce change).

From here on, the story is about ubiquitous counterfeiters, wildcat banks, bank runs and bank failures. Some of Mr. Goodwin’s best anecdotes date from this era: Louis Remme’s heroic horseback ride of 1855 to redeem $12,000 in gold that he had deposited in a bank in danger of failing, for example, and the exploits of the fabulously talented counterfeiters Taylor and Brendell. (From a jail cell in 1896, they used a homemade photographic emulsion and the light from a barred window to create a counterfeit plate that experts later thought had been made with an eight-ton press.)

It’s almost with a sense of wistfulness that we read of the closing of the dollar frontier with the defeat of the Populists, the 1873 omission of the silver dollar from the list of accepted currency and the adoption, in 1890, of a gold standard. The Wizard of Oz , Mr. Goodwin reminds us, is thought by some to chronicle these struggles. He also makes the interesting point that the dollar reveals an unexpected conservative streak in American culture: The currency’s appearance was frozen in 1929; 19th-century notes are still legal tender; and the $2 bill was a flop. Any further changes in our currency are likely to be in the direction of its disappearance, as electronic money replaces the paper item.

A Briton living in London, Mr. Goodwin observes our culture from a useful remove. The price to the American reader is the occasional false note that an editor should have tuned to the proper pitch: Mr. Goodwin refers to land being “platted” and Cotton Mather’s “laager mentality,” and talks of slavery expanding to the Southwest: “Alabama, Florida, Arkansas, Louisiana, Mississippi, and Tennessee.” And where can he have found the evidence for the claim that among the things the English have sold to Americans are “computers” and “the Net”? These are quibbles, though. Jason Goodwin’s thoughtful meditation on what Americans have made of the dollar, and what it has made of us, rings as true as the silver we’ve banished. Greenback offers many suggestive asides and some screen-worthy stories along the way. And especially in this time of financial unease, it’s useful to be reminded that the impeccable dollar we take for granted had a long, hard birth.